A Case Study in Asset Protection
The most common goals we hear from our clients are that they want to:
Maintain control of their property
Not become a burden to their loved ones, and
Keep their plan simple
Robert and Pat Richards expressed those same initial concerns. They are 75 years old. They have three children. As we talked about their children, we learned that their youngest, Philip, has Multiple Sclerosis, but is current healthy and employed. He is married, but Robert and Pat do not particularly care for her. Emily, their middle child, is married with three children. Her husband is a nice man, but is on his third business. The first two failed. Robert, Jr., the oldest, is a doctor, married with five children and is financially well off.
The Richards have a net worth of $577,000; $152,000 in bank accounts, $250,000 in brokerage accounts, a home (paid off) with a value of $150,000, and two cars and miscellaneous assets valued at $25,000. Their pension and Social Security provide $3,000 a month, which they live on comfortably.
The Richards are both healthy, but are concerned a lawsuit, stroke, or other catastrophe could wipe out their life savings. If that happened, they are afraid they would become a burden to their children.
They met with a lawyer who told them that the cost of a nursing home would exceed $6,000 a month and they would have to give all their assets away if they wanted to qualify for Medicaid to pay for a nursing home.
The Richards decided it was time to do some planning. They wanted to maintain control of their assets, remain independent, and keep their plan as simple as possible.
Using an asset protection trust, the Richards were able to:
- receive all the income from their trust;
- be the trustees of the trust, so they retained control over their assets;
- retain the right to change the beneficiaries and the timing and method used to distribute assets to those beneficiaries; and
- modify the powers of the trustee, appoint a trustee, and the trust’s administrative rules.
By giving up the right to be the direct principal beneficiaries of their irrevocable trust, the Richards were able to secure their assets from the risks of life, including health care catastrophes, and protect their life savings for themselves and the ones they love. Employing this asset protection plan, we were able to:
- Protect $449,000 of their assets immediately from all threats, including the cost of long-term nursing care
- The balance of their assets, $128,000, were at risk only 37 months
- After 37 months, an additional $3,459 per month was protected, and
- After 60 months, 100% of their assets would be completely protected from every outside threat
The Richards were able to save $449,000 immediately (78% of their assets) for about the cost of a single month of nursing care.
If you want to learn more about a simple way to protect your assets and avoid being a burden to your family, Click Here to schedule a Vision Meeting with our estate planning attorney.
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